Textile manufacturers appeal for assistance
By Quintus Perera
Textile and handloom manufacturers, struggling to survive against an onslaught of cheap imports and smuggled products, have accused the government of showing no interest in supporting their once-striving industries, despite paying lip service to the promotion of the local industry.
The local textile manufacturing industry, which supplied the entire textile needs for school uniforms, cotton cloth and all types of synthetic material prior to 1997, is now no more. Out of the 132 factories that existed, more than 100 factories have closed and the workers laid off.
The industry's decline started when the government allowed the import of textiles duty free to please garment manufacturers, local industrialists said. Nationalization of large textile manufacturing concerns also contributed to the downfall of local textile manufacturing. Large factories like Veyangoda, Pugoda, and Cyntex have closed and the remaining few are operating at marginal levels.
The collapse of the handloom industry is even more pathetic. Out of about 400 factories that had been catering to a lucrative export market, less than 25 have survived.
The result has been that a massive Rs. 12 billion capital investment on the industry has almost been lost, with nearly 65,000 persons losing their means of livelihood.
Felix Yahampath, President of the National Chamber of Exporters of Sri Lanka, said that the government, despite its rhetoric about promoting local industry, apparently shows no interest in supporting or reviving textile manufacturing in Sri Lanka, which once had been a thriving industry.
When the industry began to get affected, the local manufacturers met bank and government officials in 1997 and, after lengthy discussions, arrived at a tripartite agreement under which the government decided to put the local manufacturers on the Textiles Debt Recovery Fund.
The government agreed to take on the responsibility of settling the total debt that the textile industry owed to the banks. Once that was settled by the government, it was agreed that the debtors would repay the dues they owed to the banks to the government in instalments commencing in 2003 and spread over a period of seven years.
The government also gave local textile manufacturers a guarantee that their names would be taken off from the Credit Information Bureau (CIB) list of defaulters so that they could borrow again. As long as the CIB has their names as defaulters, the banks would reject their loan applications on being apprised by the CIB that they have been registered as defaulters. This was another promise the government never fulfilled.
Earlier, textiles were imported to the country at 35 percent duty and 12.5 percent BTT. By 1997 the government found it difficult to stop the smuggling of clothes to the country. People used to import fabric by making false declarations while some BOI-approved garment factories fraudulently released part of their raw material into the local market.
Local manufacturers said that despite several meetings with government officials detailing their precarious situation and the gradual collapse of their industries, their pleas were ignored. They were not even consulted before textile imports were allowed duty free.
Yahampath said that while textiles are imported to the country duty free, in the case of raw material imports they have to pay 20 percent VAT, 2.5 percent import duty and a 10 percent surcharge on duty. They do not have a level playing field and the government appeared to be unconcerned about local entrepreneurs.
The business environment was not conducive to the production of cheaper textiles when compared to Indian imports. Yahampath said that the energy cost alone was around 40 percent of the total cost, which is extremely high when compared to neighbouring countries. As a result local industrialists are unable to compete in the international market. Bank interest rates on loans were also too high and should be brought down to less than 10 percent if the industry is to survive. "I would also request the government to totally write off all the loans and allow us to borrow money from banks and to start new businesses. The biggest problem has been the collateral already provided to the banks."
Manufacturers said that it would be difficult to resurrect the industry and called on the government to honour its pledges and obtain the release of their collateral so that they could start some other industry.
The government promised that school uniform material and the textile requirements of the armed forced would be purchased from the local textile manufacturers to help them maintain their factories. But it only acquired 25 percent of the requirement in 2000 and 75 percent in 2001 while nothing was purchased in 2002. This year, though the government promised to buy 40 percent, nothing has been purchased so far.
One manufacturer indicated that if the local textile manufacturing industry had been allowed to grow in its natural way, with the government providing necessary infrastructure, by now the industry would have grown and able to supply the entire textile requirements of the country.
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